Engulfing Candle Strategy
Time frame: 4 hour (sometimes 1 hour but most effective on 4 hour chart)
Entry: At the close of the engulfing candle. If the engulfing candle is bullish, enter a BUY trade. If the engulfing candle is bearish, enter a SELL trade
Take profit: Use a minimum Reward:Risk Ratio of 1:1. So if your SL is 60 pips, your TP must be at least 60 pips. To minimize risk, start trailing your stop when you are between 1/3 to ½ of your target (my personal preference is ½ of target). For example, if your target is 60 pips, start trailing at 20 – 30 pips profit.
How to scan the market for engulfing set ups
Since we are trading the 4 hour chart, scan your charts at 0000, 0400, 0800, 1200, 1600, 2000 (this is Cyprus MT4 server time)
Extra notes:
• Good engulfing candles usually come after a rally.
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